sacramentobankruptcyblog.com

One of the frequently asked questions is that if you file bankruptcy, can you do a loan modification while awaiting  discharge?  The answer  is yes.  How you go about it may depend on whether you file a Chapter 7 or Chapter 13.

In a Chapter 7, the debtor may not be able to keep the property and make  the payments unless the lender consents to a modification, because the lien survives the discharge.  In a Chapter 7 case, there is no provision in the Bankruptcy Code for modifying a mortgage loan.  Your case lasts about 3-1/2 to four months and so you need to reinstate the loan before the discharge is entered and the cases close.  You either need to bring the loan current or work something out with the lender in between.   There is no provision or program to cure the default over time, and once the discharge is entered, the automatic stay is lifted.  That means that if any arrearages on the loan have not been cured by that time, the lender can proceed to foreclose on the property.  The lien is not discharged in the bankruptcy, even thought the personal debt or obligation is wiped out.  If you can’t bring the payments up or make arrangements with the lender during the bankruptcy, the the debtor should seek a loan modification outside bankruptcy in order stay in the house.

If you filed Chapter 13, you cannot modify a mortgage loan secured on a debtor’s primary residence under provisions of the Bankruptcy Code.  However, if the lien on the house is totally unsecured, no equity protecting the lien and house is totally underwater) you can strip it off in a “cram down.”  Obama said that he would sign such a bill if presented to him, but legislation that would have allowed that died in Congress earlier this year, after much outcry from people complaining that the law should not help people when most people were making their payments, and strong opposition from the Banking Industry.

In a Chapter 13, the debtor needs to get approval for any kind of modification, refinancing or sale of the property, from both the Chapter 13 Trustee and the Court.  The debtor may not be able to confirm a Chapter 13 plan unless a 1st deed of trust consents to a loan modification.  The question is feasibility.  If the debtor’s plan does not propose to cure the default in the Chapter 13, the plan cannot be confirmed.  In this case, the debtor may not be able to confirm a plan and will as a result end up losing the house.  Another question is whether the loan modification would alter the debtor’s disposable income and increase the amount available to unsecured creditors.  If the debtor is able to cure default, the language of Chapter 13 provides that all disposable income must be pledged into the plan.  That might mean that if the debtor obtains a loan modification during the pendency of the Chapter 13 plan, both the plan payments and the plan need to be modified to reflect the change in disposable income reflecting decrease in mortgage payments.

The bottom line is that if you can’t afford the payments, contact your lender.  The sooner you get started on a loan modification, the better.   There have been numerous articles about the effectiveness of loan mod programs.  Anyone working in the industry will tell you that it is not easy to make contact with the lenders who have been besieged with loan mod requests.  At the same time, while the banks are attempting to ramp up their loan mod programs and have been adding staff, the number of loans in default is expected to increase over the next two years.  Like anything, it takes persistence and consistency.

paulbar Uncategorized Arrearages, Banking Industry, Bankruptcy, Bankruptcy Code, Chapter 13, Chapter 7, Congress, Consents, Cram Down, Debtor, File Bankruptcy, Four Months, Iff, Legislation, Loan Modification, Mods, Mortgage Loan, Obligation, Opposition, Outcry, Personal Debt, Provision, Provisions

The Saramento Bee ran a number of interesting articles recently which contrasted the decline in the housing market, the fall from grace of local Titans Reynand & Bardis, CC Meyers and others, at the same time as “Active Adult” living seems to be doing quite well.  The question I had in the early 2000′s when houses were growing faster than weeds in Roseville, Lincoln, and Elk Grove, was how many people can afford these kind of houses.  Well the answer was, not that many.  Harry Dent wrote an interesting book called the Great Depression Ahead (he was the same guy who wrote The Roaring 2000′s, if you’ll recall) and one of the significant things he points out that the housing boom was caused by simple  demographics, baby boomers raising families, upsizing and acquiring stuff.  But as the Baby Booms started to leave the job market and started becoming empty nesters and moving to retirement or active adult communities, there was going to be less of a demand for consumers goods and upscale housing.  Gen Xers following behind, are fewer in number and also have different lifestyle values, perhaps not as family oriented and not holding the same kind of materialistic work ethic.

So as developers like Angelo Tskapolous, Pulte and Centex acquire properties to develop at bargain basement prices, and new players enter the market, what kind of housing do they plan to build?  Not only was the housing market artificially overpriced, it appears to have been grossly overbuilt, so if you’re are going to build today, the successful market is going to consider the market, and build what people want to buy, not what they want to sell based on how much profit can be made on large houses.  It appears the housing trend will be toward smaller, lower maintenance living.  If the real estate industry is going to recover, it is going to have consider marketing demographics and do a better job in feasibility studies.

paulbar Uncategorized Active Adult Communities, Baby Boomers, Bardis, Bargain Basement Prices, Booms, Centex, Elk Grove, Empty Nesters, Fall From Grace, Feasibility Studies, Great Depression, Harry Dent, Housing Market, Lifestyle Values, Marketing Demographics, Pulte, Saramento Bee, Significant Things, Upsizing, Work Ethic

Eighty more restaurants fell victim to the weak economy including 10 TGI Fridays in Sacramento and the Pacific Northwest.

In a related series of closures, 70 Jack in the Box restaurants from Fresno to Redding shut their doors in midweek, only to open days later after four controlling entities sought bankruptcy protection from creditors.

The closures followed as the financial woes of troubled Roseville real estate developer Abe Alizadeh continued.  He is listed as president of each of those companies and has controlling interest in half of the newly closed T.G.I. Friday’s restaurants.  The closures temporarily affected about 2,100 employees, not including people thrown out of work at the T.G.I. Friday’s restaurants.in the recording.  According to a representative for Alizadeh and the company, Alizadeh controls two corporations that own and operate five T.G.I.Friday’s restaurants: two in Sacramento two in Roseville and one in Elk Grove.

The corporations, Ten Forward Dining Inc. and TGIA Restaurants, Inc., are headquartered in the same Lava Ridge Court address in Roseville, according to records on file with the California Secretary of State’s Office.

Five other T.G.I. Friday’s in Oregon and are controlled by Alizadeh’s brother, Mike Alizadeh through a company, Great Northwest Restaurants Inc., of Roseville.

The four entities that own and operate the Jack in the Box franchises in the Central Valley, Sierra Valley Restaurants, Inc., Food Service Management, Inc., Central Valley Food Services, Inc., and Kobra Associates, Inc., which filed separate Bankruptcy Petitions under Chapter 11 of the Bankruptcy Code on Friday. Kobra Properties, Inc., another of Alizadeh’s companies, the real estate development corporation, has been in Chapter 11 since November, seeking to restructure approximately $277 million debt.

These Bankruptcy filings suggest the fallout of not only the decline of commercial and retail properties, but also reflect the downturn in consumer spending available to support such restaurant establishments.  These filings likely demonstrate a correlation between falloff in consumer spending, the residential retail market, and the health of retail and commercial properties.

paulbar Uncategorized Abe Alizadeh, Bankruptcy Code, Bankruptcy Filings, Bankruptcy Petitions, Bankruptcy Protection, Brother Mike, California Secretary Of State, Court Address, Elk Grove, Financial Woes, Food Service Management, Food Services Inc, Kobra Properties, Lava Ridge, Northwest Restaurants, Protectin, Real Estate Developer, Retail Properties, Roseville Real Estate, Sierra Valley, Tgi Fridays, Tgia, Valley Restaurants

Jim Wasserman in the Bee had some interesting reporting on machinations at the State Capitol. As financial train wreck from the housing crash continues across California, state lawmakers have sent several bills that crack down on mortgage fraud to Gov. Arnold Schwarzenegger’s desk.

Recently the Assembly and Senate jointly passed bills to ban loan modification companies from asking for upfront fees and make mortgage brokers put their customers’ financial needs ahead of their own commissions. The Bills also propose to limit the size of pre-payment penalties and would add California to the roster of states that allow prosecutors to file specific felony charges for those accused of mortgage fraud.

These measures are of course reactive and not proactive.

One of the Bills most sweeping mortgage reform bills this year, Assembly Bill 260, bans so-called subprime “negative amortization” loans where the amount owed grows even as the borrower makes payments. It also prevents mortgage brokers from receiving thousands of dollars in special fees for originating subprime loans and those with pre-payment penalties. The bill also limits the size of pre-payment penalties for borrowers who pay off their loans early.

Lastly, it requires that mortgage brokers have a fiduciary duty to borrowers – that is, they must place the “economic interest of the borrower ahead of the broker’s own economic interest” when making loans.

That provision is especially opposed by the California Association of Mortgage Brokers. Fred Arnold, a Santa Clarita-area broker and the group’s past president, said the bill’s definition of fiduciary duty is vague and an invitation to “frivolous lawsuits.” “It’s not necessary,” said Arnold, “We already have a fiduciary duty under the Department of Real Estate.”

Last year, the governor vetoed a similar broad-based bill by Lieu.

The bills land on Schwarzenegger’s desk as California continues wrestling with more than 410,000 foreclosures since the start of 2007, the aftermath of unfettered lending (and borrowing) practices earlier this decade.

During the housing boom, mortgage brokers could earn fees of $20,000 or more for making risky subprime adjustable-rate loans, often to unsuspecting borrowers. A contrary view would be the borrowers knew what they were doing and decided to roll the dice in a surging market. many unqualified buyers got into homes they knew they could not afford but decided to roll the dice anyway in hopes that the anticipated record appreciation in value would continue.

Among groups backing changes in mortgage practices is the California District Attorneys Association, which is pushing for new felony penalties for mortgage fraud. The group sponsored a bill now before the governor, Senate Bill 239, by Sen. Fran Pavley, D- Agoura Hills. It would create a specific category of felony mortgage fraud, which the DA’s group calls “one of the linchpins in the demise of the California real estate market and the related crises in the financial sectors.”

The group says Sacramento ranks seventh among U.S. metropolitan areas in reporting mortgage fraud complaints to the FBI.

Finally, Schwarzenegger faces a choice of two bills that would bar loan modification companies from asking struggling borrowers to pay upfront fees.

Both bills banning upfront loan modification fees – Assembly Bill 764 by Assemblyman Pedro Nava, D-Santa Barbara, and Senate Bill 94 by Sen. Ron Calderon, D-Montebello – passed the Legislature earlier this week. The governor has 30 days from a bill’s passage to sign it, veto it or let it become law without his signature.

Finally, nowhere does there seem to be any discussion of the borrowers responsibility to become educated and knowledgeable about their own finances. There was also no discussion of effects of Governmental pressure to promote those programs, such as the Community Reinvestment Act. In fact, anyone who has read Thomas Sowell’s book “The Housing Boom and Bust” can understand how government deregulation of the banks and over-regulating requiring funds to make “affordable housing” available, actually created the bust.

While much of the commentary seems to focus on finding fault with the lending industry, it leads one to believe that all borrowers in trouble were just unwitting victims.  This simply is not the case.  There were two parties to the transaction, a willing buyer and a willing lender.  It’s time that people woke up and realized that it worked on both sides of the deal.  Personal gain and profit were the motivators for both parties, not in long term thinking about cost or value.

PR: wait… I: wait… L: wait… LD: wait… I: wait… wait… Rank: wait… Traffic: wait… Price: wait… C: wait…

paulbar Uncategorized Area Broker, Arnold Schwarzenegger, Assembly Bill, Assemblyman, Association Of Mortgage Brokers, California Association Of Mortgage Brokers, Department Of Real Estate, Economic Interest, Felony Charges, Fiduciary Duty, Frivolous Lawsuits, Governor Jim, Jim Wasserman, Loan Modification, Mortgage Fraud, Mortgage Reform, Negative Amortization Loans, Reform Bills, Risky Loans, State Lawmakers, Subprime Loans, Train Wreck, Upfront Fees